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Could FTX be Behind Grayscale Bitcoin ETF Outflows?

Last Updated January 23, 2024 10:06 AM
Teuta Franjkovic
Last Updated January 23, 2024 10:06 AM

Key Takeaways

  • After the SEC approved the launch of 10 spot Bitcoin ETFs, global crypto investment products have declined.
  • The Grayscale Bitcoin Trust (GBTC) experienced significant outflows in its first week as an ETF.
  • Investors opt for newer spot Bitcoin ETFs offered by BlackRock, Fidelity, and others.

Last week saw a decrease in worldwide interest in cryptocurrency investment products, resulting in $21 million in outflows .

This contrasts with the previous week when crypto funds experienced $1.25 billion  in inflows, following the introduction of 10 spot Bitcoin exchange-traded funds in the United States.

Sudden Outflows After Record Inflows

On January 10, the US Securities and Exchange Commission (SEC) approved the launch of spot Bitcoin ETFs, resulting in the introduction of nine new funds into the market. The recent downturn was primarily influenced by Grayscale Investment’s spot Bitcoin exchange-traded fund (GBTC), which accounted for $2.2 billion in withdrawals.

Crypto asset flow
Credit: Bloomberg, CoinShares

FTX’s Bankruptcy Estate Linked to Major Sell-off

FTX’s bankruptcy estate played a significant role in the recent large-scale withdrawal  from the Grayscale Bitcoin Trust (GBTC), offloading 22 million shares, as Matthew Dixon, CEO of Evai, shared on X. This move significantly impacted the fund, which had been in operation for a decade as a less attractive closed-end fund before its conversion to an ETFF. At the time of the SEC’s approval of GBTC’s transformation  and the introduction of new bitcoin ETFs, GBTC had amassed nearly $30 billion in assets.

In contrast to GBTC, which has seen billions in outflows, new spot Bitcoin ETFs from entities like BlackRock and Fidelity, which began trading on January 11 following SEC approval, have experienced significant inflows. The data indicates that FTX’s divestment was a major factor in GBTC’s outflows. The sale of FTX’s entire GBTC stake,  amounting to 22 million shares valued at close to $1 billion, marks a substantial shift in the landscape of bitcoin investment products.

Mixed Performance in Spot Bitcoin ETF Market

In the dynamic spot Bitcoin ETF market, Bitwise secured the third position in inflows, amassing $395.5 million, closely followed by Ark Invest/21Shares and Invesco with $320.9 million and $194.9 million respectively.

Out of eleven ETFs, ten witnessed a collective inflow of almost $3.4 billion. Leading the charge in yesterday’s inflows were Fidelity’s FBTC and BlackRock’s IBIT, attracting $177.9 million and $145.6 million respectively, while Invesco’s BTCO saw the third-highest at $59 million. Ark Invest/21Shares and Bitwise followed with $41.8 million and $20.1 million in inflows.

Over the week, the market experienced fluctuations, with a return to net inflows of $474 million on the last Wednesday, contrasting starkly with net outflows on the last Tuesday and the largest outflow on the fifth day of trading. Grayscale, BlackRock, and Fidelity remained prominent in trading volume and assets under management, cumulatively nearing a trading volume of $14 billion, with Grayscale’s GBTC, BlackRock’s IBIT, and Fidelity’s FBTC contributing significantly.

Grayscale Bitcoin Trust Loses $579M as Investors Opt for ETFs

Just a week ago, in its initial trading days as an ETF, the Grayscale Bitcoin Trust experienced significant withdrawals, with investors pulling out approximately $579 million. This shift came after the US SEC approved its conversion from a trust to an ETF last week, as previously reported. The outflow from this fund contrasts sharply with the combined inflows of nearly $819 million into the other nine spot Bitcoin ETFs.

James Seyffart, an ETF analyst at Bloomberg Intelligence, highlighted the impact of the ETF conversion  on the Grayscale Bitcoin Trust (GBTC), noting that this transition has allowed for a clearer understanding of the fund’s flow dynamics. Seyffart pointed out that the withdrawals might be indicative of investors capitalizing on profits.

This data provides a comprehensive view of the fund’s performance following its SEC approval. Despite a significant trading volume of over $2.3 billion on its first day as an ETF, the subsequent outflows suggest that a considerable portion of this activity was attributable to sales.

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